Background of the Case

On 12^th December 2018, the learned single judge partially allowed the petition based on Section 34 of Arbitration and Conciliation Act (A&C), reducing the interest rate awarded by the arbitral tribunal in the favour of appellant/ claimant, from 18% to 12% and restricting the application of interest from the date of the accrual of the cause of action to the date (08^th March 2004) of the invocation of arbitration (6^th July 2008). In this regard no appeal was preferred against order by the appellant.

Subsequently, After the section 34 petition had been finally disposed of on 12 December 2018 (Date of Judgment), the respondent moved an application for modification of the order, dated 12^th December 2018, in which the court had admitted the application for modification and modified the award and denied the claim of interest by passing an order on 8^th August 2019.

Dissatisfied with the said outcome, the appellant preferred an appeal under Section 37 of the A&C Act (Arbitration and Conciliation Act) before the Hon’ble Delhi High Court (HC).

Plaintiff/Appellant – Anil Kumar Gupta

Defendant/Respondent – Municipal Corporation of Delhi & Anr

Delhi High Court Observations:

The Delhi High Court critically analysed the sequence of events. It affirmed that once a Section 34 petition has been conclusively decided by a final order, subsequent applications seeking modification are inappropriate. The court clarified that the August 8, 2019, order couldn't be considered a review but rather a new decision reached through a fresh hearing.

The court asserted that the impugned order needed to be set aside primarily due to its impermissible nature, violating the finality of a Section 34 disposition. It underscored the legal position that once a Section 34 petition has been disposed of, the court cannot entertain applications seeking modification.

Delving into the power to modify arbitral awards, the court referred to Supreme Court principles, highlighting the distinction between setting aside an award and modifying its terms. It pointed out the statutory shift from the Arbitration Act, 1940, and emphasized that the December 12, 2018, order breached this legal framework.

The court reinforced the principles laid down by the Supreme Court, citing precedents like NHAI v. M Hakeem & Anr. (2021) & M/s Larsen Air Conditioning v. Union of India (2023), to emphasize the impermissibility of altering the interest rate awarded by the Arbitral Tribunal. Consequently, the court allowed the appeal, nullifying the orders of December 12, 2018, and August 8, 2019. The Section 34 petition was reinstated and remanded to the learned Single Judge for reconsideration.

In essence, the Delhi High Court's ruling reinforces the sanctity of final orders in Section 34 proceedings, prohibiting subsequent modifications that compromise the conclusiveness of the initial disposition. The judgment also underscores the limited scope of Section 34 in terms of modifying arbitral awards, aligning with established legal principles.

Landmark Judgement Cited

• NHAI v. M Hakeem & Anr. (2021):
  • The Supreme Court had said that a Section 34 of A&C act, court can only set aside an arbitral award and not modify it.
• M/s Larsen Air Conditioning v. Union of India (2023):
  • The Supreme Court draws a line pertaining to the powers of the court under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, wherein the courts are considering the challenge to an award and appeal against the orders passed by the court or the tribunal

Source

1. Anil Kumar Gupta Vs. Municipal Corporation of Delhi & Anr., FAO(OS) (COMM) 315/2019 & CM Nos. 47880/2019 & 47884/2019, order dated 30^th November, 2023.